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BUSINESS EDUCATION UNDERGRADUATE PROJECT TOPICS RESEARCH WORKS AND MATERIALS

IMPACT OF WORKING CAPITAL MANAGEMENT ON THE PROFITABILITY OF SELECTED FOOD AND BEVERAGES MANUFACTURING COMPANIES IN NIGERIA

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CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE

1.2 MENT OF THE PROBLEM

Maintaining a proper liquidity indicates that funds are confined to liquid assets thereby making them unavailable for operational use or for investment purposes for higher returns. Thus, there is an opportunity cost associated with the maintenance of those liquid assets and this might affect the overall profitability of the firm. In other words, increasing profitability would tend to reduce firms liquidity and too much attention on liquidity would tend to affect the profitability (Smith 1980). So, Raheman and Nasr (2017) think that, the final goal for any firm is to maximize the profitability of the firm by preserving the liquidity. However, increasing profits at the cost of liquidity might cause serious trouble to the firm and this issue might lead to financial insolvency as well. Thus an effective WCM would be needed to strike a balance between the two core objectives of the firm. The firm’s liquidity should not be too high or too low. Excessive liquidity on one hand indicates the accumulation of idle funds that don’t fetch any profits for the firm (Smith 1980). On the other hand, insufficient liquidity might damage the firm’s goodwill, deteriorate firm’s credit standings and that might lead to forced liquidation of firm’s assets. Afterwards problems like bankruptcy and insolvency might happen. To add up, a unable to make profits might be seen as a sick but, a having no liquidity might cease to exist.

1.3 OBJECTIVE OF THE

The general objective of this work is to examine the impact of working capital management on the profitability of selected food and beverage manufacturing companies in Nigeria. The specific objectives of the study are;

1) To examine how firm’s characteristics affect the relationship between working capital management and profitability.

2) To examine the effect of cash conversion cycle on profitability of food and beverages companies in Nigeria.

3) To examine the level of Working capital management on profitability of food and beverages companies.

4) To examine the impact of management policies on the relationship between working capital management and profitability.

5) To examine the effect of current ratio on the food and beverages companies in Nigeria. 

1.4 QUESTIONS

1) How do firm’s characteristics affect the relationship between working capital management and profitability?

2) What is the effect of cash conversion cycle on profitability of food and beverages companies in Nigeria?

3) What is the level of Working capital management on profitability of food and beverages companies?

4) What is the impact of management policies on the relationship between working capital management and profitability?

5) What is the effect of current ratio on the food and beverages companies in Nigeria?

1.6 HYPOTHESES

Hypothesis 1

Ho: There is no significant relationship between cash conversion cycle and profitability of food and beverages manufacturing companies in Nigeria

H1: There is a significant relationship between cash conversion cycle and profitability of food and beverages manufacturing companies in Nigeria

Hypothesis 2

Ho: There is no significant relationship between current ratio and profitability of food and beverages companies in Nigeria

H1: There is a significant a significant relationship between current ratio and profitability of food and beverages companies in Nigeria.

Hypothesis 3

Ho: There is no significant impact of firm characteristics on profitability of food and beverages companies in Nigeria

H1: There is a significant a significant impact of firm characteristics on profitability of food and beverages companies in Nigeria

1.6 OF THE

The study would have contribution to enlighten the society on the impact of working capital management on the profitability of selected food and beverages manufacturing companies in Nigeria. It would also prepare ground for interested researcher who might wish to conduct further research in related areas and could contribute to the existing literature.

  1. SCOPE OF THE

The study is restricted to the impact of working capital management of selected food and beverages manufacturing companies in Nigeria.

1.8 LIMITATION OF THE

Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview)

Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work

1.9 OPERATIONAL DEFINITION OF TERMS

Working Capital Management: Working capital management is a business strategy designed to ensure that a operates efficiently by monitoring and using its current assets and liabilities to the best effect. A ’s working capital is made up of its current assets minus its current liabilities.

Profitability: Is the ability of a business to earn a profit. A profit is what is left of the revenue a business generates after it pays all expenses directly related to the generation of the revenue, such as producing a product, and other expenses related to the conduct of the business activities.

Food and Beverages Companies: The food and beverages industry is all companies involved in processing raw food materials, packaging, and distributing them. This includes fresh, prepared foods as well as packaged foods, and alcoholic and nonalcoholic beverages.

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